Development banker who is banking on Indian corporates

Sir Suma Chakrabarti, the high-profile president of the London-headquartered European Bank for Reconstruction and Development (EBRD), who took over at the helm last year for a four-year term, definitely has India on his radar. This is a bit of a surprise because India, his country of origin, is not a member of EBRD and the bank doesn’t have any direct operations here. But, nevertheless, Chakrabarti is going all out to forge alliances with the private sector in India and hopes that India Inc will partner EBRD in its madate of supporting the modernisation of economies in the 34 countries of its operations.

During a recent visit to India, the first top-level visit by an EBRD team after 2007, Chakrabarti met finance minister P Chidambaram and India’s chief economic advisor Raghuram Rajan. But more importantly, he spoke with private sector players about joint investments in areas where the bank operates because he believes that EBRD can work with Indian companies to help them strengthen their positions in those regions. Since 2012, EBRD has extended its operations to some countries in the Middle East and North Africa, in the wake of the Arab Spring.

“We see a very important role in this region for Indian companies; many of them have already made inroads into these markets. In the four countries where the EBRD invests in this area, Egypt, Morocco, Tunisia and Jordan, Indian companies have invested nearly Euro 5 billion in the last nine years for the creation of some 17,000 jobs,” Chakrabarti said during his recent visit to Delhi & Mumbai. He met with senior officials from many companies and banks including Mahindra & Mahindra, Reliance Industries, EXIM Bank and ICICI Bank during the visit.

Unlike its fellow development finance institutions such as the World Bank, which largely provides loans to infrastructure projects, or the International Monetary Fund, which gives balance of payments loans, EBRD invests only in private sector projects. It has $40 billion in assets under management with average size of projects at $30 million. “We have worked with private sector companies in India for many years. Since EBRD was created in 1991, we have invested over Euro 806 million together with Indian companies and joint investment has been especially strong in Russia (Euro 562 million),” Chakrabarti, who was born in Jalpaiguri, West Bengal, and whose parents still live in Kolkata, said.

EBRD was set up to help develop market economies in the former communist eastern Europe and the former Soviet Union and expanded to Turkey in 2008. Some of the Indian companies that EBRD is involved with include SREI Leasing, which was provided equity and loan to help the company’s Moscow operations to grow its leasing portfolio; Tata Global Beverages, with which EBRD teamed up for the joint acquisition of a controlling stake in the Russian branding, packaging and distribution company Grand, a well-known player in Russia’s coffee and tea sector and Mumbai-based JSW, with which a steel mill in the Georgian town of Rustavi is being jointly constructed and operated ($28 million loan). Besides, the world’s largest steel company, ArcelorMittal, headed by Indian-born magnate L.N. Mittal, has received an EBRD loan of $200 million to optimise production capacity at its Kriviy Rih steel plant in Ukraine.

For many of the Indian companies which are looking at expanding their footprint in new geographies, joint ventures with EBRD are a win-win deal. “EBRD became a stakeholder in our project when we decided to expand our operations globally and looked at the Russian market. They have deep economic, geographic and political knowledge about the market which helped us to expand our operations in the region to over four branches currently. EBRD would be an ideal partner for other Indian companies and entrepreneurs who are looking to set up operations in the geographies that it operates in,” says Sunil Kanoria, vice-chairman of SREI group.

EBRD had put in Euro 1.5 million to acquire 15% of the shares in SREI Leasing Moscow and a loan of Euro 5 million. For JSW Steel the high country risk and challenging business environment in Georgia was the reason for opting for a joint venture with EBRD. “The involvement of EBRD enabled us to finance the project successfully. Prior to commissioning of the project, Georgia was exporting scrap and importing steel. An opportunity was found to set up a steel plant to use the locally available scrap and to produce steel, meeting the domestic demand within Georgia and adjacent countries,” says Seshagiri Rao, joint MD, JSW Steel & group CFO. The company is now scouting for opportunities to associate with EBRD not only in financing but also in development of the country and region.

Even though India is not a shareholder in EBRD yet, Chakrabarti firmly believes that the increasingly important role of India on the world stage shows that the country’s big corporate groups can work together with the EBRD to help it achieve the mandate it has been given by its 66 shareholders to support the development of market economies. He is an alumnus of Oxford University and lives in London. He was a senior bureaucrat in UK administration before taking up the assignment at EBRD and his last assignment was as permanent secretary in UK’s ministry of justice. Chakrabarti speaks Bengali; loves Indian food and literature and visits his parents in Kolkata often.

DISCLAIMER : Views expressed above are the author's own.

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Ishani Duttagupta is Editor, Global Indian with The Economic Times. She has been covering issues related to the Indian diaspora and migration of Indians overseas for a decade. Ishani has a post-graduate degree in English Literature from Jadavpur University, Kolkata.

Ishani Duttagupta is Editor, Global Indian with The Economic Times. She has been covering issues related to the Indian diaspora and migration of Indians ove. . .